Research

Research plays a crucial role in all phases of our investment process from acquisitions to dispositions.

In-house and collaborative research underlies nearly all of our investment decisions. We write and produce several research documents on a regular basis. These publications are used to educate potential investors, while keeping our current clients informed of topics that may be relevant to their portfolio.

Current

Over the past year, U.S. interest rates have moved higher, with the Federal Reserve steadily ratcheting up the Fed Fund rate. More recently, interest rates for longer-term Treasury bonds have also moved higher, responding to stronger domestic and global economic growth and expectations of increasing inflationary pressures. Over the next 18 months, the strong fundamentals currently characterizing the U.S. economy should be sufficient to offset any potential negative impacts of rising interest rates on timberland markets. In the medium-term, timberland should be well positioned to weather a cyclical economic down-turn resulting from further increases in interest rates.

Current

The potential impacts for U.S. timberland owners of the federal tax reform signed into law at the end of 2017 should in general be favorable. The tax reform does curtail some deductions for homeowners (mortgage interest and property taxes), which could provide a headwind for the housing recovery. However, these lost tax incentives will be limited to a particular slice of the income spectrum, and should be largely offset by the favorable positive economic effects of reduced corporate and individual tax rates on overall economic growth. The new legislation left intact provisions of the tax code that specifically support investment in timberland, and the reductions in the U.S. corporate tax rates should encourage increased investment in the U.S. forest product sector, boosting demand for timber from U.S. forests.

Current

U.S. private timberland investment total returns rose to 3.63 percent in 2017, a 103 basis point increase from 2016 with moderate gains in both operating income and capital appreciation. Timberland performance differed across regions. Strong prices paid for logs in the West bumped up cash yields, and expectations for continued strength pushed western capital appreciation up over 300 basis points from 2016. Timberland investments in the South returned below average income in 2017 which resulted in stagnant valuations despite growing capital investment in the South’s forest product sector.

Current

China is the largest importer of softwood sawlogs in the world, with a decades long trend of rising imports which reached a new peak in 2017. Yet, China may be approaching a turning-point as a build-up in its debt levels clouds the prospects for China’s construction sector while at the same time, China’s preference shifts from importing unprocessed sawlogs toward favoring lumber.

Current

A new building product, Cross Laminated Timber (CLT), is beginning to gain traction in the U.S. and has the potential to add significant new demand for timber from a wide array of forest types. CLT use will be focused on market segments outside of the core markets for traditional lumber and wood panels (single-family residential construction). CLT will be competing more directly with concrete and steel construction. Implications for timber markets will be distinctly different than the major introductions of new wood products over the past thirty years—oriented strand board, medium density fiber board, and engineered wood I-beams— which took market share from building materials already made from wood.

Current

Twenty-six years of historical loss data indicate that the risk of a catastrophic loss for a timberland portfolio is low, at 0.11 percent per year on average of total global assets under management (AUM). Fire damage has been the leading cause of loss at just over 0.06 percent per year on average of total global AUM, followed by damage from storms, at nearly 0.05 percent.* Losses caused by natural events can be effectively mitigated with active forest management and portfolio diversification, while total revenue losses can be reduced with timber salvage operations.

Current

New duties and a potentially more restrictive long-term trade agreement on Canadian softwood lumber will support higher lumber prices and boost the market share of U.S. softwood lumber mills, but the potential positive impacts for U.S. timberland owners will be restrained. The expected boost in U.S. sawtimber demand tied to changes in trade policy is likely to be moderated by increasing imports of softwood lumber from non-Canadian suppliers. The benefits of the duties to U.S. timberland owners will be most pronounced in the U.S. West Coast, where higher lumber prices will more directly translate into increased sawtimber values.